International Game Technology beat Wall Street expectations on adjusted EBITDA and net revenues by 9 percent and 5 percent, respectively, with its third quarter earnings, the company reported Tuesday morning.
The surprise performance was driven by strong same-store sales growth, 6.8 percent year-over-year, in its global lottery segment for the quarter, and the game manufacturer upped its full-year EBITDA guidance to between $1,640 million and $1,680 million.
“Our largest global lottery operations are growing steadily and acceptance of our newest gaming machines is expanding around the world. The significant increase in gaming and lottery product sales demonstrates clear interest in our systems and technology solutions,” said Marco Sala, chief executive officer.
IGT’s top line numbers were mixed, reflecting the sale of its DoubleDown social games unit earlier this year.
Net revenues were down 6 percent on a constant currency basis to $1.2 billion, adjusted EBITDA dropped by 3 percent to $428 million and adjusted operating income fell 12 percent to $258 million – or $0.40 per share.
“Thanks to a favorable product sales mix and reduced operating expenses, Adjusted EBITDA improved from the prior-year period, after considering certain non-comparable items, such as the DoubleDown sale,” said Alberto Fornaro, chief financial officer, noting that higher product sales and lower expenses helped to mitigate losses attributable to DoubleDown.
The company attributed its $556 million loss for the quarter to “a non-cash, non-tax deductible impairment charge of $714 million to write down the carrying value of the Company’s North America Gaming and Interactive reporting unit to fair value” and stressed that this charge would have no effect on its operations, cash flow, debt servicing or underlying liquidity moving ahead.
“Overall, adjusting for the sale of Double Down and new Lotto amortization, revenues grew 2 percent on a constant currency basis, while EBITDA grew 2 percent on the same basis,” said Chad Beynon, an analyst with Macquarie Research, in a research note.
“Read-throughs from competitor Scientific Games (+5 percent US Instant, +6 percent US Draw and +5 percent Italy Instants) ended up actually being stronger for IGT. North American Lottery (+$24 million better), International (+$15 million better) and Italy (+$15 million better) all contributed to the quarterly beat,” Beynon continued.
IGT’s gaming segment also picked up steam a quarter or two earlier earlier than analysts had been predicting.
Gaming service revenue grew by 5 percent and global gaming product revenue grew by 9 percent due to strong systems and software sales. IGT shipped 6,406 units in the quarter and grew its global installed base grew by 3,275 units – including casinos and video lottery terminals.
Controlling for the DoubleDown sale, revenues in the North America Gaming & Interactive segment grew 4 percent year-over-year to $262 million on the heels of 20 percent growth in software and system sales and higher average selling price per cabinet.
While revenues in the North America Lottery segment were flat from the prior year quarter, same-store lottery sales were up 9.4 percent on improved sales of draw-based games, instant tickets and multistate jackpots.
As of September 30, the company had $7.3 billion in debt on its balance sheet against $300 million in cash and cash equivalents.
After closing at $23.85 on Monday afternoon, IGT shares were trading as high as $27.32 on Tuesday. The company also declared a $0.20 quarterly cash dividend to be paid out December 12.
